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Privatization is the culprit in natural gas prices crisis

By Jim Sinclair
President, B.C. Federation of Labour
British Columbians are bracing for the highest gas bills in the province’s history. Businesses like value-added gas plants and greenhouses are predicting closures. How did we get here? And—more importantly—how do we get out of here?
Natural gas production and distribution, unlike electricity, has suffered the double blow of deregulation and privatization, thanks to the former Social Credit government’s sale of B.C. Gas and the deregulation of gas pricing.

Today, we are paying the price. And the same forces that have brought us to this crisis in natural gas have turned their sights on B.C. Hydro, hoping to convince us that deregulation and privatization will work for Hydro. Just last month, the B.C. Business Summit reiterated the demand to sell off crown corporations and introduce so-called “competition” to areas such as electricity sales and the insurance industry.

Business should be careful, it might get what it wants.

Selling off B.C. Hydro and deregulating the electrical industry would lead almost immediately to price hikes ranging from 300 to 700 per cent for all customers, residential and business alike.

The economic fallout would be enormous.

We don’t have to look far to see what the privatization and deregulation agenda of the largest corporations in the world means to each and every one of us. People in California and Alberta have tasted deregulation, and they’re in open rebellion against it.

The results of deregulation have been disastrous in California. Electricity rates have climbed dramatically, and the full impact hasn’t even been felt yet because rates have been frozen to the consumer.

The consumer rates were frozen at artificially high levels to compensate the former regulated utilities, but the wholesale price (the price utilities pay to buy power) was not. The wholesale price skyrocketed and now major utilities are lining up to demand the state’s taxpayers pay $6 billion to bail them out.

In Washington State, where electricity for large companies is open to market speculation and price hikes, 800 workers at the Georgia Pacific paper mill are off the job as a result of an indefinite shutdown caused by soaring electricity rates. Those prices have gone from $70 Cdn a megawatt hour to more than $600 Cdn a megawatt hour, or $11.5 million per month. Because it’s market-driven, the price is also volatile. Management fears a cold snap could raise the price to $1,400 Cdn per megawatt hour. In contrast, large industrial customers in B.C. pay a steady $35 per megawatt hour and have not had an increase in seven years.

“We can’t pay that so we are not running,” Georgia Pacific general manager Jim Cunningham told the Bellingham Herald recently.

Across the border in Alberta residents and businesses are experiencing the same downsides of deregulation. Prices have doubled, and despite election year rebate payments and a rate freeze for the next 12 months, the government is still under fire for its failed deregulation experiment.

“I think it’s a major crisis,” said Jayson Myers, senior vice-president and chief economist for the Canadian Manufacturers and Exporters. Alberta is at a “disadvantage” compared to British Columbia and some businesses face cutbacks, layoffs and closures. The spectacle of brown outs has already started to occur in Alberta.

What are the answers in British Columbia? With all the new talk of the need for labour and business to build a new relationship, this situation offers the perfect opportunity. Let’s ensure the failed market policies of deregulation and privatization are not applied to B.C. Hydro.

Low-cost power is a fundamental advantage for working people and businesses to enjoy. We can’t afford to give that away.

As for natural gas, the horse is already out of the barn. But can we afford to let the free market run wild when it comes to basic fuel costs? Both California and Alberta have decided they can’t let an unregulated electricity market run amok and are placing caps and freezing the price of electricity. In Alberta, there’s similar talk of a cap on natural gas prices.

In a resource-abundant province like B.C., why shouldn’t the government place a cap on gas prices? This would curtail windfall profits, but guarantee a fair return to companies involved in the industry.
The other short-term options, such as taxpayer-financed payments to British Columbians, should also be explored. But if the government is going to compensate for high prices, industry—which is making windfall profits itself—should step up to the plate and match the rebate. And, of course, all our actions should be tied directly to a renewed commitment by all players to a pro-active conservation strategy.

Protecting our low-cost electricity rates and curtailing the skyrocketing prices of natural gas is good for all British Columbians.